Few Friends For Proposal On Media

By STEPHEN LABATON

Published: November 14, 2007

The head of the Federal Communications Commission on Tuesday announced the details of his plan to relax the longstanding rule that had prevented a company from owning both a newspaper and a radio or television station in the same city.

But the deregulatory proposal of Kevin J. Martin, the chairman of the Federal Communications Commission, may actually force some large media conglomerates to shed stations or newspapers.

For 32 years, supporters of the restriction have maintained that it prevents the growth of ever- larger media conglomerates and helps to keep diverse voices on the airwaves.

These critics denounced Mr. Martin's proposal for containing what they said were loopholes that could lead to widespread consolidation.

At the same time, however, the newspaper industry's main trade association and an executive at the Tribune Company separately criticized the plan and said it would not go nearly far enough to help them.

While the plan provides a path for Samuel Zell, the Chicago real estate investor, to complete the buyout of the Tribune Company, it also puts some obstacles in the way -- most notably a possible delay in completing the deal until after the end of 2007, which would make it significantly more expensive for the buyers, primarily Tribune employees.

In a memo to employees on Tuesday, the head of Tribune suggested that he was dissatisfied, regarding Mr. Martin's plan as not going far enough. He also said he would seek to have it expanded.

Under the proposal, Tribune will have to sell media companies in Hartford and possibly Chicago.

The head of the News Corporation, Rupert Murdoch, will have to fight for an exemption if he wants to continue to control The New York Post and two television stations -- WWOR and WNYW -- in the metropolitan area.

Other companies, including Gannett and Media General, would have to seek exemptions if they want to continue to hold newspapers and broadcast stations in smaller markets.

In 1975, the commission adopted a rule that generally restricted a company from owning both a newspaper and a station in the same city. Many companies that already had such holdings at the time, including The New York Times Company, which owns a radio station in Manhattan, were unaffected because of a grandfather clause.

Since then, some companies have received what are supposed to be temporary waivers until new rules are adopted. Most media companies are operating under a waiver, the grandfather clause or both. Those waivers are reviewed any time a station changes hands.

Mr. Martin's plan would enable a media company to own both a newspaper and either a radio or smaller television station in the nation's 20 largest markets. If the company owns a TV station, then there must be at least eight independent TV stations and newspapers in the same market.

Unless Congress intervenes, Mr. Martin appears to have the votes at the commission to have the rules adopted next month. But that could pose significant problems for Mr. Zell to complete the buyout of the Tribune Company by the end of the year.

Mr. Zell wants to complete the transaction by Dec. 31 to take advantage of tax rules that could save the newly formed company more than $100 million. In addition, if the deal is not closed by Dec. 31, the $34 a share that shareholders would receive would rise by an additional 8 percent.

Tribune executives have said that their banks need 20 working days after obtaining regulatory approval to line up $4.2 billion in financing to complete the deal. Mr. Martin expects to complete a vote on his plan on Dec. 18.

While Mr. Martin said he did not anticipate granting new long-term waivers to any companies -- including Tribune, he said in a telephone call with reporters that a two-week exemption might be possible if he already knew he had the votes to complete the rule making by Dec. 18.

Terry Holt, a spokesman for Mr. Zell, referred all questions about the deal to Gary Weitman, a spokesman at Tribune. Mr. Weitman declined to comment. In an e-mail message to employees, the chief executive, Dennis J. FitzSimons, said Tribune still hoped to close the transaction by the end of the year. He also said that the company would ''seek an expansion of cross-ownership relief'' beyond what was contained in Mr. Martin's plan.

Commission officials said that Tribune representatives had been in discussions with officials to try to come up with a way for the commission to provide enough of a signal of its intentions to satisfy the bankers.

But for media deals in the future, it is unclear whether the new rules will make it significantly easier for conglomerates to own both a newspaper and a station in most markets.

In telephone briefings with reporters, Mr. Martin said the commission would consider granting exemptions if other combinations were in the public interest, but that the ''presumption would be against them.''

The proposal would require the commission in granting exemptions to consider the level of media concentration and make a finding that the companies involved would increase the amount of local news. It would require a commitment that both the newspaper and the station exercise independent news judgment. Finally, the commission would be obliged to consider the financial condition of the newspaper, and whether the owner was committed to invest significantly in the operations of a paper in distress.

In announcing his plan, Mr. Martin said he sought to strike a compromise that would assist what he said was a financially ailing newspaper industry while trying to be sensitive to concerns about the effects of media consolidation on the quality of news coverage.

''The newspaper industry has faced significant challenges recently and I feel we have to do all we can to ensure we continue to have a vibrant industry,'' Mr. Martin said.

His plan was criticized by some lawmakers, who said it would lead to too much consolidation. They have introduced legislation to delay action by the commission.

''The chairman of the Federal Communications Commission has put forward what I'm sure he regards as a reasonable compromise on the issue of media consolidation,'' said Senator Byron Dorgan, Democrat of North Dakota. ''But he has yet to make the case for why any further media consolidation is necessary. Indeed, he is relying on an assumption that newspapers are doomed and that cross-ownership is necessary to save them. I believe this is not the case.''

The plan was also attacked by the Newspaper Association of America, which complained that it was too modest and that Mr. Martin did not go far enough.

''The fundamental issues he raises concerning the vitality of newspapers and assuring that local news remains available to the public in print and in broadcast are not confined to the top 20 markets,'' said John F. Sturm, president and chief executive of the trade organization.

It was also challenged in a statement by the two Democrats on the commission, Michael J. Copps and Jonathan S. Adelstein.

The two commissioners said that despite Mr. Martin's portrayal of the plan as a modest one, the top 20 markets constitute 43 percent of the nation's households. And they said the plan gave loose guidelines that would permit the commission to grant many exemptions in smaller markets.

''This is not to my mind a modest proposal,'' Mr. Copps said. ''It is gift-wrapped to look like a modest proposal. It strikes me as immodest and opens the floodgates to a lot of deals.''

But for the Tribune, at least, the rules are likely to lead to some sales of media properties. Tribune owns two TV stations and a newspaper in Hartford, which is not one of the Top 20 markets. It also owns a radio and a television station in Chicago, as well as The Tribune. (The rule, as proposed, lets a company own a newspaper and either a radio or TV station.)